Why Do-It-Yourself Payroll Software Might Be a Mistake

The biggest headache confronting most small-business owners is payroll. An incorporated enterprise must prepare paychecks even if the owner is the only worker. That also applies to an S corporation or LLC that’s federally taxed as a corporation.

Payroll calculations are complex and tedious. Computing payroll taxes, determining employee deductions, writing checks and remitting tax payments are time-consuming tasks. Consequently, business owners are inclined to hire payroll services. But an increasing number of businesses are embracing one of the many do-it-yourself computer applications for payroll.

These platforms allow businesses to save the cost of outsourcing payroll. However, payroll software is not a once-in-a-lifetime expense. These programs require constant updates to the embedded payroll tax tables because the Internal Revenue Service frequently revises them. Subscription to an online update is needed. This is not free.

More important, payroll software isn’t a completely automated process. It’s easy to use only if you have bookkeeping experience.

Manual data input is required for every new employee and each pay date. Someone must generate quarterly payroll reports and annual forms such as W-2s.

A payroll system that integrates with the general accounting program is best.

Stand-alone applications sometimes promise to interface with popular accounting programs. But interfaces are cumbersome to operate and often unreliable.